Coordinating Coordination Failures in Keynesian Models

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Published in RePEc

Abstract

This paper focuses on the importance of strategic complementarity in agents' payoff functions as a basis for macroeconomic coordination failures. We first analyze an abstract game and find that inefficient equilibria and a multiplier process may arise in the presence of strategic complementarities (essentially positively sloped reaction curves). We then place additional economic content on complementarities arising from production functions, matching technologies and commodity demand functions in a multi-sector economy.

Keywords

COORDINATING COORDINATION
STRATEGIC COMPLEMENTARITY
COORDINATION FAILURES
POSITIVELY SLOPED
COMPLEMENTARITIES
PLACE ADDITIONAL
KEYNESIAN MODELS
MULTIPLIER

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